What Is the EBITDA Multiple?
The EBITDA multiple — commonly written as EV/EBITDA — is one of the most widely used valuation ratios in finance. It expresses a company's enterprise value (EV) as a multiple of its earnings before interest, taxes, depreciation, and amortization (EBITDA). Because EBITDA strips out financing and accounting decisions, the multiple lets investors compare companies with different capital structures and tax situations on a more level footing.
How to Use This Calculator
Enter the company's enterprise value and its EBITDA (both in the same currency and period). The calculator divides EV by EBITDA and returns the multiple. A result of 8x means the company is valued at eight times its annual EBITDA. Lower multiples can suggest a cheaper valuation, while higher multiples often reflect strong growth expectations or premium industries.
The Formula Explained
The math is simple: $$\text{EBITDA Multiple} = \frac{\text{Enterprise Value}}{\text{EBITDA}}$$. Enterprise value is typically market capitalization plus total debt minus cash and equivalents. EBITDA is operating profit with depreciation and amortization added back. The ratio answers: "for every dollar of operating earnings, how much is the whole business worth?"
Worked Example
Suppose a company has an enterprise value of $5,000,000 and EBITDA of $1,000,000. The EBITDA multiple is $$\$5{,}000{,}000 \div \$1{,}000{,}000 = \textbf{5.0x}$$ If a comparable peer trades at 7x, the first company may be relatively undervalued — assuming similar growth and risk.
FAQ
What is a "good" EBITDA multiple? It varies by industry and growth. Many mature businesses trade between 4x and 12x, but high-growth tech can exceed 20x.
Why use EV/EBITDA instead of P/E? EV/EBITDA accounts for debt and ignores tax/accounting differences, making cross-company comparisons more reliable than the price-to-earnings ratio.
Can the multiple be negative? Yes — if EBITDA is negative the multiple is not meaningful, which is why it's typically applied to profitable companies.
